South Korea to Introduce Blockchain-Based Deposit Tokens for Public Expenditure in Q4

As part of a broader initiative to modernize public fund management, South Korea's Ministry of Economy and Finance is set to launch a trial of blockchain-based deposit tokens for government expenditure in the fourth quarter. According to local media reports, the pilot project, which involves using digital currency to disburse Treasury funds, has been approved under the 2026 regulatory sandbox program. The approval enables the use of tokenized deposits to cover business promotion expenses, which are currently processed using government purchasing cards. This move marks a significant shift from the traditional system governed by the Treasury Funds Management Act, which mandated card-based payments. In the sandbox environment, agencies will be allowed to operate outside these rules on a limited basis to test innovative methods. Officials anticipate that this change will enhance oversight, as token-based payments can be programmed with specific conditions, including time limits and industry restrictions. This could minimize the need for manual audits, particularly when spending occurs outside regular hours. The new system also eliminates intermediaries, such as card networks, which the ministry believes could lead to lower transaction fees for small businesses receiving government payments. This is the second instance of deposit tokens being used in Treasury operations, following an earlier pilot project related to subsidies for electric vehicle-charging infrastructure. The trial is scheduled to take place in Sejong City after a selection process for participating firms, as stated in the report. The ministry plans to expand the program if it demonstrates improved control over spending and measurable cost savings.